Suncoast owner interested in buying Regent resort

David Strow

Friday, Aug. 10, 2001 | 11:07 a.m.

Coast Resorts Inc. entered the bidding for the Regent Las Vegas at a Thursday bankruptcy court hearing, making a surprise bid of $82 million for the bankrupt Summerlin hotel-casino.

The move was a last-minute move by Coast to replace Los Angeles real estate investment firm Maritz Wolff & Co. as the "stalking horse" (preferred) bidder for the Regent. Though Coast offered $2 million more for the property, Bankruptcy Judge Robert Jones instead approved Maritz Wolff as the preferred bidder in the sale process.

With this decision, the Regent is now officially up for bids. From now through Sept. 17, interested buyers can attempt to "overbid" Maritz Wolff for the property. The Regent's auction will be held Sept. 25.

"There's a lot of interest and we're going to have a good auction," said Frank Merola, attorney for the Regent. "Now the game's afoot."

But there is dissatisfaction with the $80 million bid offered by Maritz Wolff for the property. In Thursday's bankruptcy court hearing Edward Peterson, an attorney for Regent construction manager J.A. Jones Construction Co., called the offer "appallingly low." J.A. Jones claims it is owed more than $31 million by the Regent.

"It's better to stop this (process) and have an independent trustee appointed to liquidate the assets," Peterson said.

Merola, however, said Coast's surprise bid is evidence that interest is high in the property, making it likely $80 million won't be the final sale price.

"If Coast is interested ... the auction process has already begun, and the auction process is working," Merola said.

Coast is the owner of the Suncoast hotel-casino, located less than a quarter-mile south of the Regent on Rampart Boulevard. It has been rumored as a potential bidder, but its participation Thursday was unexpected. Merola said the offer sheet from Coast wasn't received until Wednesday evening. Attorneys for the Las Vegas locals casino operator argued they made more sense as a preferred bidder, as they were offering more money for the property, could easily receive a license from the Nevada Gaming Commission, and were familiar with the Summerlin area and the Las Vegas market.

Merola said he was "pleasantly surprised" by the Coast offer, but successfully convinced Jones that the sale process couldn't be delayed any longer. If Coast was interested, Merola said, it could always try to top Maritz Wolff's offer during the overbid process.

Coast officials said they haven't yet decided whether they will compete with Maritz Wolff in the auction process, and didn't say why they were interested in acquiring the property.

"At the price Peccole (Nevada Corp.) offered ($150 million), we weren't interested," said Tito Tiberti, vice president and minority shareholder of Coast. "At this price ($80 million), we are interested."

Coast is the second-largest operator of locals-oriented hotel-casinos in the Las Vegas Valley, trailing only Station Casinos Inc. Coast owns and operates Suncoast, the Orleans, Gold Coast and Barbary Coast.

But there are other interested parties as well. One is Las Vegas real estate development firm Peccole Nevada, which had partnered with Heller Financial Inc. of Chicago and PDS Gaming Corp. of Las Vegas to make a $150 million stalking horse bid on the property. Maritz Wolff replaced this group as the stalking horse after Peccole and Heller split up, citing disagreements with the deal's structure.

"We are still interested in the property and we will be a participant in the overbid process," said Lynn Purdue, spokeswoman for Peccole.

Another party that will likely bid on the property is its current equity owner, Swiss Casinos of America.

"We are interested in looking at a way to be an overbidder," said Swiss Casinos Chief Executive John Tipton. Swiss still hasn't decided, Tipton said, whether it will pursue the property alone or in partnership with another company.

Other parties mentioned as potential pursuers of the Regent include Station Casinos, Silverton owner Ed Roski Jr., Starwood Hotels & Resorts Worldwide Inc., Arizona Charlie's and Stratosphere owner Carl Icahn and Desert Inn owner Steve Wynn.

Any party interested in buying the Regent will have to post a $5 million cash deposit or letter of credit, and it will have to offer at least $83 million for the property. They will also have to present evidence to Regent officials that they have financing in place for a bid, and that they have the ability to get a Nevada gaming license. The Regent has the discretion to reject any bidder, though the court will have the final say on which parties will be allowed to participate in an auction.

"The worst thing that could happen to us is to unseat the stalking horse bid ... and to have that higher and better bid not close," Merola said.

Even if another party outbids Maritz Wolff for the Regent, the Los Angeles company will not walk away empty-handed. In Thursday's hearing, Jones approved the payment of a $1 million break-up fee to Maritz Wolff if a deal is signed with another bidder.

This request drew flak from certain corners, particularly from J.A. Jones.

"This is completely unnecessary when the stalking horse is getting such a great deal here," Peterson said.

But Maritz Wolff attorneys responded that a break-up fee probably wouldn't cover their expenses plus the cost of opportunities lost while the firm focused on the Regent offer. And Merola said it wouldn't cost creditors any money, as the payment would be made only if higher bids were received for the Regent.

"Every buyer required some kind of break-up fee as overbid protection," Merola said. "We're comfortable this is about as good as we're going to get."

The Regent and Maritz Wolff requested a maximum payment of $2 million -- a $1.5 million break-up fee, and up to $500,000 in expenses. Jones knocked $500,000 off the break-up fee request, though he agreed to allow Maritz Wolff to recover up to $750,000 in expenses if it isn't successful in landing the property. That means Maritz Wolff will be entitled to a maximum payment of $1.75 million if it is not successful in acquiring the property.

"I've never approved a break-up fee before, but I can see the need for it here," Jones said. "But I'm also mindful we're at a relatively low (sale) figure. While we do need an incentive, we don't need a $1.5 million fee on an $80 million bid.

"If you're talking about a $150 million bid, then I think we would be talking about a $2 (million) or $3 million fee."

Separately, a lawsuit has been filed in New York federal court in connection with the case.

Bloomberg News reported that Wall Street brokerage firm Morgan Stanley Dean Witter & Co. has sued Swiss Casinos. Morgan Stanley owns some of the Regent's bonds, and said Swiss Casinos agreed last year to purchase the bonds from Morgan Stanley by Aug. 31, 2000. Swiss Casinos had agreed to pay $30 million for the bonds, Morgan Stanley said.

But Swiss Casinos has not lived up to this agreement, Morgan Stanley said, and the firm wants a federal judge to order Swiss Casinos to buy the bonds. At the sale price now being considered for the Regent, it is unlikely any funds will be left for bondholders after secured creditors are paid.

Tipton said he hadn't read the lawsuit and couldn't comment.